Tax Implications & Record Keeping Flashcards
7 cards from real CPT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Tax Implications & Record Keeping flashcards as text
A married trader filing jointly has $80,000 in long-term capital gains for the tax year. Assuming their total taxable income falls in the 22% ordinary income bracket, what federal rate applies to these long-term gains?
Answer: 15%
For married filing jointly taxpayers in the 22% ordinary bracket, long-term capital gains are taxed at 15%.
The Net Investment Income Tax (NIIT) imposes an additional 3.8% tax on investment income for taxpayers whose modified adjusted gross income exceeds:
Answer: $200,000 single / $250,000 joint
The 3.8% NIIT applies to individuals with MAGI above $200,000 (single) or $250,000 (married filing jointly).
Which document should a trader use to track the cost basis of shares when the same stock was purchased at multiple different prices over time?
Answer: Lot-level purchase records or average cost worksheet
Lot-level purchase records or an average cost worksheet allow traders to accurately compute cost basis using methods like FIFO, LIFO, or specific identification.
A trader realizes $50,000 in short-term capital gains and $60,000 in short-term capital losses. How is the $10,000 net loss treated?
Answer: It offsets other capital gains first; up to $3,000 offsets ordinary income; the rest carries forward
Net capital losses first offset capital gains; up to $3,000 may offset ordinary income annually, and any excess carries forward to future years.
Which cost basis accounting method typically results in the highest cost basis and therefore the lowest taxable gain when selling shares from a position built up over time at rising prices?
Answer: Specific Identification of highest-cost lots
Specifically identifying and selling the highest-cost lots first maximizes cost basis, minimizing the recognized gain.
A trader keeps a daily trading journal noting entry/exit prices, rationale, and outcomes. Beyond its use as a trading tool, what is its primary tax benefit?
Answer: It provides documentation to support trader tax status qualification if audited
A detailed trading journal documents the frequency, regularity, and intent of trading activity, which is key evidence if the IRS audits a trader tax status claim.
Estimated quarterly tax payments for traders are due on which standard IRS schedule?
Answer: April 15, June 15, September 15, January 15
Estimated taxes are due April 15, June 15, September 15, and January 15 of the following year (adjusted when those dates fall on weekends or holidays).